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Lowering Denial Rates for Peak Financial Performance

Posted Friday, June 8th, 2012 by Denise Junkin

A medical practice’s revenue cycle has many moving parts, and making sure everything works together is essential for optimal revenue cycle performance. An important part of making sure everything works together is knowing how to measure several key metrics, such as denial rates. Reducing this percentage will help save time and allow staff to focus on other revenue-generating tasks.

Defining and calculating your denial rate is fairly simple. Your denial rate is the percentage of claims denied by payers, and to calculate the value, all you have to do is determine a designated period of time, such as the previous quarter and add up the total dollar amount of denied claims during this time period. Once you have this amount, divide it by the total dollar amount of claims submitted by the practice during the same period of time. This will give you the percentage of denied claims, and as you might imagine, the lower the percentage, the better.

Most practices can use these figures to gauge how well they’re faring with their denial rate:

Best performers: Denial rate less than 5%

Average performers: Denial rate between 5-10%

Poor performers: Denial rate greater than 10%

Performance measured by denial rate – like all billing indicators – is influenced by your payer mix and specialty and the level of automation that is deployed. Your clearinghouse can help conduct a more in-depth denial rate analysis by payer, provider, remark code and category to gain an even better sense of the factors influencing your denial rate.

Although denials are technically those that are adjudicated and rejected by payers, the business office should work to catch mistakes before they go out the door. The more internal “rejections” you can catch, the fewer denied claims payers will send back. Automated processes can also help ensure your practice has lower denial rates, and thus improved cash flow.

To learn more about the specifics of measuring denial rates and other key metrics, download this free resource guide, Key Metrics in Revenue Cycle Management: Measurements that Ensure Peak Financial Performance.